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: 2025.01.10
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US Dollar Index Price Forecast: Sits near two-year peak, above 109.00 ahead of US NFP
World FX news
Breaking news
US Dollar Index Price Forecast: Sits near two-year peak, above 109.00 ahead of US NFP
New
2025.01.10 18:02
2025.01.10 18:02
2025.01.10 18:02
- DXY consolidates its recent move up back closer to a two-year peak amid the Fed's hawkish shift.
- Geopolitical risks and trade war fears further underpin demand for the safe-haven Greenback.
- The USD bulls turn cautious and wait for the release of the US NFP report before placing fresh bets.
The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, stands firm above the 109.00 mark, or its highest level since November 2022 as traders await the US Nonfarm Payrolls (NFP) report before placing fresh bets.
In the meantime, the prospects for slower rate cuts by the Federal Reserve (Fed), which has been a key factor behind the recent surge in the US Treasury bond yields, continue to act as a tailwind for the buck. Apart from this, concerns about US President-elect Donald Trump's tariff plans, geopolitical risks and a weaker risk tone turn out to be other factors underpinning the safe-haven Greenback.
From a technical perspective, this week's goodish rebound from the 107.55-107.50 resistance-turned-support and the subsequent move up favors bullish traders. Moreover, oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone. This suggests that the path of least resistance for the index is to the upside and supports prospects for further gains.
That said, it will still be prudent to wait for a move beyond the 109.55 area, or over a two-year peak touched earlier this month, before placing fresh bullish bets. The USD might then accelerate the move-up towards the 110.00 psychological mark. The momentum could extend further towards the 110.50-110.55 region en route to the 111.00 mark and the November 2022 peak, around the 111.15 zone.
On the flip side, the 108.75 region could offer some support, below which the index could accelerate the fall towards the 108.15 area en route to the 108.00 mark and the 107.55 horizontal zone. Some follow-through selling below the latter should pave the way for a deeper corrective decline and drag the USD below the 107.00 round figure, towards testing the next relevant support near mid-106.00s.
DXY daily chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the 'de facto' currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world's reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed's 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed's weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Last updated
: 2025.01.10
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US Dollar trades steady while markets await NFP report
The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, is trading steady this Friday, at 109.17 at the time of writing, ahead of the US employment report due later.
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2025.01.10 21:16USD/JPY: The pair is expected to trade with an upward bias - UOB Group
US Dollar (USD) is expected to trade in a range between 157.60 and 158.55. In the longer run, USD is expected to trade with an upward bias; any advance is expected to face significant resistance at 159.00, UOB Group's FX analysts Quek Ser Leang and Lee Sue Ann note.
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2025.01.10 20:58Fed's Musalem: Greater caution is warranted on reducing interest rates - WSJ
In an interview with the Wall Street Journal, St. Louis Federal Reserve President Alberto Musalem suggested that greater caution is warranted on reducing interest rates, per Reuters.
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2025.01.10 20:52EU natural gas prices get weaker - ING
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2025.01.10 20:51NZD/USD: Sustained break below 0.5570 seems unlikely - UOB Group
Scope for the New Zealand (NZD) to test the 0.5570 level; a sustained break below this level seems unlikely. In the longer run, risk for NZD is beginning to shift to the downside, but it must break clearly below 0.5570, UOB Group's FX analysts Quek Ser Leang and Lee Sue Ann note.
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2025.01.10 20:46Oil remains well supported - ING
Oil prices remain well supported with ICE Brent settling 1% higher yesterday, ING's commodity analysts Warren Patterson and Ewa Manthey note.
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2025.01.10 20:35Gold positions for a breakout ahead of December's NFP report
Gold's price (XAU/USD) is set to keep its winning streak for a fourth straight day this week, currently trading around $2,680 at the time of writing on Friday.
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2025.01.10 20:34GBP: UK Treasury eases market nerves - ING
The 10-year gilt stabilised around 4.80% yesterday, which has allowed the pound to partially recover after hitting a 1.224 low yesterday morning.
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2025.01.10 20:32AUD/USD: Next support at 0.6150 is not expected to come under threat - UOB Group
AUD could retest the 0.6175 level; the next support at 0.6150 is not expected to come under threat. In the longer run, AUD must break and remain below 0.6180 before further weakness can be expected, UOB Group's FX analysts Quek Ser Leang and Lee Sue Ann note.
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2025.01.10 20:30CAD is pressured by the perceived risk of a US-Canada trade war - ING
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2025.01.10 20:20Disclaimer:
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